renewable energy technology (ret) for micro …...renewable energy technology (ret) for...
TRANSCRIPT
-
Renewable Energy Technology (RET) for Micro-Enterprise (ME):
A Study of Solar Home System (SHS) in Durgapur Upazila, Bangladesh
By
Md. Amdad Hossan
MPPG 4th
Batch
Thesis submitted to the
Public Policy and Governance (PPG) Program
in partial fulfillment for the award of
Master in Public Policy and Governance (MPPG)
December 2015
Department of Political Science and Sociology
North South University
Dhaka, Bangladesh www.mppg-nsu.org
-
I
Dedicated to
Freedom Fighters of Bangladesh
-
II
Acknowledgement
It is a great pleasure for me to express my heartiest gratitude to my supervisor Dr.
Rizwan Khair, visiting Associate Professor, Department of Political Science and
Sociology, North South University, Dhaka and Director (International Programme),
Bangladesh Public Administration Training Centre (BPATC), Savar, Dhaka for his
heartfelt support and intellectual guidance throughout the whole research work. His
scholarly suggestions shaped my idea that helped me much in exploring diverse issues
related to my research. Undoubtedly, his continuous encouragement enhanced my morale
to make this dissertation a success.
I would like to convey my sincere appreciation to Professor Salahuddin M.
Aminuzzaman, Adviser, MPPG, North South University, Dhaka and Dr. SK. Tawfique
M. Haque, Director, MPPG, North South University, Dhaka for offering their invaluable
comments and advice during the total MPPG program including thesis.
I am also very indebted to my teachers Dr. Istiaq Jamil, Md. Mahfuzul Haque and
Dr. Shakil Ahmed for their important suggestions and comments at various stages of my
research work.
I would like to offer my sincere thanks to Dr. Md. Zohurul Islam, Deputy Director
(Service), BPATC and Mr. Md. Akram Hossain, Research Associate, MPPG, North
South University, Dhaka for their help in data analysis.
My special thanks to Md. Abdullah Al Baki, Branch Manager, Durgapur Brach
and Nur Mohammad Sarkar, Divisonal Manager, Grammen Shakti for their valuable time
and cooperation during the survey. I am also thankful to all my colleagues and
respondents for extending cordial cooperation.
Finally I acknowledge the sacrifices of my family members – my wife Shamima
Eaysmine and only kid Abdullah Ehteshum Aaryan who had to tolerate my eccentricities
when I was struggling to meet the deadlines.
December 2015 Md. Amdad Hossan
-
III
Abstract
―Micro-Enterprises (MEs)” provide the necessary foundations for sustained
growth and rising incomes in the less developed and transitional economies. However, in
the current state of changing times, MEs need to adapt themselves to new realities and
challenges and to stay competitive. In Bangladesh, SHS becomes a popular electrification
tool in rural off grid areas. This study was conducted to find the role of SHS uses for ME
development in rural off grid areas, and to study the changes brought to rural ME by up
taking SHS. Mixed method (both quantitative and qualitative methods) has been adopted
for this study. This study has examined the role of SHS on trade and service related rural
MEs in off grid area of Durgapur Upazila, Bangladesh. The data were gathered from
primary and secondary sources. Primary data were collected through questionnaire
survey, in-depth interviews and observations.
From the study it has found that rural entrepreneurs are using SHS mostly for
lighting, charging mobile phone and powering small DC fan. Productive use of SHS is
seen by this study but the numbers are low. Some of the entrepreneurs are using SHS as a
development tool. SHS is not equally helping to all the entrepreneurs for bringing change
in their MEs. As a whole, the role of SHS to bring change in the investment and profit of
the MEs were a little; to bring change in the working hour, working condition, product
and service quality, customer service delivery, number of customer of the MEs were
moderate. No role of SHS was found for brining change in the employment and employee
wages by this study. Change in the energy expenditure and medium of entertainment
highly influence by the use of SHS. The number of entrepreneurs observed change in the
medium of entertainment is small but the role of SHS is for bringing the change is high.
Not only the role of SHS for changing investment and profit is a little but also the average
change is quite low in monetary value. Those who have used SHS for business purpose
(productive use of SHS), they observed high level of change in all change indicators. This
study conclude that SHS can enhance the capability to bring change in the MEs by the
entrepreneurs but due to the limitation of the SHS and lack of business aptitude of the
entrepreneurs, the desired level of change is not happening for the MEs.
-
IV
Table of Contents
Page No
Dedication I
Acknowledgement II
Abstract III
Table of Contents IV
List of Tables VII
List of Figures VIII
List of Abbreviations IX
Chapter 1 Introduction 01-13
1.1 Introduction 01
1.2 Background and Context 03
1.3 Statement of the Problem 07
1.4 Research Objective 09
1.5 Research Questions 09
1.6 Scope and Limitations of the Study 09
1.7 Significance and Rationale of the study 09
1.8 Operational Definition of the Two Core
Concept
11
1.9 Outline of the Chapters 12
Chapter 2 Current State of Renewable Energy Development in
Bangladesh
14-27
2.1 Introduction 14
2.2 Current State of Power Generation of
Bangladesh
15
2.3 Renewable Energy Expansion Initiative 17
2.3.1 Renewable Energy Policy 17
2.3.2 Current Contribution and Future Plan of
Renewable Energy Development in the Power
Sector
18
2.4 Function and Role of Infrastructure
Development Company Limited's (IDCOL)
22
2.4.1 IDCOL SHS program 22
2.4.1.1 Delivery and Financing Scheme of IDCOL
SHS program
24
2.4.1.2 Microcredit Financing for SHS Dissemination 25
2.4.2 IDCOL Solar Irrigation Program 26
2.4.3 Concluding Remark of IDCOL Role 26
-
V
2.5 Conclusion 27
Chapter 3 Literature Review, Theoretical Concept and
Analytical Framework
28-47
3.1 Introduction 28
3.2 Literature Review 28
3.2.1 Inference Drawn from the Literature Review 39
3.3 Theoretical Framework 41
3.3.1 Capability Approach 42
3.4 Analytical Framework 44
3.4.1 Variables Matrix 46
3.5 Conclusion 46
Chapter 4 Methodology 48-54
4.1 Introduction 48
4.2 Methods of Inquiry 48
4.3 Sources of Data 49
4.4 Data Collection Technique 50
4.5 Selection of Study Area 51
4.6 Sampling Method and Population Size 51
4.7 Data Analysis Tools and Plans 52
4.8 Limitation of the Data 53
4.9 Reliability and Validity of the Data 53
4.10 Ethical Consideration 54
4.11 Conclusion 54
Chapter 5 Data presentation, Analysis and Discussion 55-86
5.1 Introduction 55
5.2 Demographic Features of the Respondents 55
5.3 Description of the ME 57
5.4 Types and Number of Services Taken from
SHS and Capacity of the SHS
60
5.5 Role of Different Characteristics of the
Entrepreneur and ME on the Capacity and
Usage of SHS
63
5.6 Changes in the ME after up Taking SHS 67
5.7 Relationship Between the Personal and
Business Characteristics with the Change in
the ME after up Taking SHS
70
5.8 Relationship between the Capacity and Use of 71
-
VI
SHS with the Change in the ME
5.9 Discussion on the Role of SHS for Bringing
Change in the ME
73
5.9.1 Change in the Working Hour 74
5.9.2 Change in Profit 75
5.9.3 Change in Investment 77
5.9.4 Change in Employment 78
5.9.5 Change in Wages of the Employee 79
5.9.6 Change in Energy Expenditure 79
5.9.7 Change in Working Condition 81
5.9.8 Change in Product and Service Quality 82
5.9.9 Change in Customer Service Delivery 82
5.9.10 Change in Number of Customers 84
5.9.11 Change in Mediums of Entertainment 84
5.10 Discussion on the Socio-economic Change in
the Study Area
85
5.11 Conclusion 86
Chapter 6 Conclusion 87-92
6.1 Introduction 87
6.2 Issues for Future Policy Consideration 88
6.3 Recommendation for Future Practice 91
6.4 Conclusion 92
6.5 Scope for Future Research 92
References 93-103
Appendix I 104
Appendix II 107
Appendix III 113
Appendix IV 120
Appendix V 121
Appendix VI 122
Appendix VII 123
Appendix VIII 125
-
VII
List of Tables
Page No.
Table 1.1: Number of Nonfarm Economic Units in the Three Economic
Censuses
5
Table 1.2: Definition of SMEs/MSMEs 11
Table 2.1: Installed Capacity of BPDB Power Plants as on November 2015 16
Table 2.2: Proeect under ―500MW Solar Power Programme” 19 Table 2.3: Target for RE development of different government organization 19
Table 2.4: Approved Renewable Energy Projects 20
Table 2.5: Current contribution of renewable energy 21
Table 2.6: The share of different type of solar technology 21
Table 2.7: Year-wise installation of SHS by IDCOL 23
Table 2.8: SHS price list of different system capacity 25
Table 2.9: Solar irrigation program of IDCOL 26
Table 3.1: Dependent Variable‘s measuring indicators and Operational Definition
46
Table 4.1: Rearrangement of some question for quantitative analysis 52
Table 5.1: Age and Education Level of the Respondents 56
Table 5.2: Business activity, Business sector and Capital of the MEs 58
Table 5.3: Summary of the characteristics of ME 59
Table 5.4: Use of SHS 60
Table 5.5: Purpose of SHS use (n=47) 61
Table 5.6: No. of service taken from SHS by the entrepreneurs (n=47) 61
Table 5.7: System Capacity of SHS of the MEs (n=47) 62
Table 5.8: SHS up taking year of the MEs (n=47) 62
Table 5.9: Pearson Correlations analysis of characteristics of the entrepreneur
and the ME with the system capacity of SHS and types of services
taken from SHS
64
Table 5.10: Summary of the linear regression analysis for 1st empirical relation 64
Table 5.11: Descriptive statistics of the level of changes observed by the ME 69
Table 5.12: Summary of the Pearson Correlation matrix between independent
variables and some selected dependent variables of this study.
70
Table 5.13: Summary of the Pearson Correlation matrix between intervening
variables and some selected dependent variables of this study.
72
Table 5.14: Descriptive statistics of influence of SHS for observed changes 73
-
VIII
List of Figure
Page No.
Figure 1.1: Solar Home System 12
Figure 2.1: GDP growth rate and electricity generation growth of Bangladesh 15
Figure 2.2: Year wise total Production of renewable energy 21
Figure 2.3: SHS installation growth over the years of IDCOL 23
Figure 2.4: SHS program Structure of IDCOL 24
Figure 3.1: Demonstration of the Capability Approach by means of the bike
example
43
Figure 3.2: Analytical framework of the study 45
Figure 5.1: Satisfaction Level of the Entrepreneur about SHS use (n=47) 67
Figure 5.2: Change observed by the ME (n=47) 68
-
IX
List of Abbreviations
7FYP Seventh Five Year Plan
AC Alternating Current
ADB Asian Development Bank
APCL Ashuganj Power Station Company Limited
BBS Bangladesh Bureau of Statistics
BCCTF Bangladesh Climate Change Trust Fund
BPDB Bangladesh power Development Board
CPGCL Coal Power Generation Company Bangladesh Limited
DC Direct Current
DFID Department for International Development
EGCB Electricity Generation Company Bangladesh
FY Fiscal Year
GDP Gross Domestic Product
GEF Global Environment Facility
GIZ Gesellschaft für Internationale Zusammenarbeit
GoB Government of Bangladesh
GPOBA Global Partnership of Output-Based Aid
GS Grameen Shakti
IDB Islamic Development Bank
IDCOL Infrastructure Development Company Limited
IFC International Finance Corporation
IPP Independent Power Producer
IRENA International Renewable Energy Agency
IRR Internal rate of return
JICA Japan International Cooperation Agency
KfW Kreditanstalt für Wiederaufbau
kWh Kilowatt-hour
LED Light-emitting Diode
ME Micro-Enterprise
MSME Micro, Small and Medium Scale Enterprise
MW Mega Watt
NGO Non Governmental Organization
-
X
NPV Net Present Value
NREL National Renewable Energy Laboratory
NWPGCL North West Power Generation Company Limited
PO Partner Organizations
PRA Participatory Rural Appraisals
PV Photovoltaic
RE Renewable Energy
REN21 Renewable Energy Policy Network for the 21st Century
REP Renewable Energy Policy
RET Renewable Energy Technology
SFYP Sixth Five Year Plan
SHS Solar Home System
SME Small and Medium Enterprises
SREDA Sustainable and Renewable Energy Development Authority
TV Television
UN United Nations
USAID United States Agency for International Development
VAT Value Added Tax
Wp Watt-peak
-
1
Chapter 1
Introduction
1.1 Introduction
Micro, small and medium scale enterprise (MSME)1 which is usually called small
and medium scale enterprises (SME), occupy an important and strategic place in
economic growth and equitable development in all countries, especially in the developing
countries. A healthy MSME/SME sector contributes prominently to the economy through
creating more employment opportunities, generating high production volumes and
introducing innovation and entrepreneurship skills (ESCAP 2011). Micro, small and
medium scale enterprises are playing increasingly important role as engines of economic
growth in most of the developing countries. There are around 90 million micro, small and
medium scale enterprises (MSMEs) in developing countries and emerging markets, and
the density of formal MSMEs in low and middle income countries is rising (Kushnir et al.
2010). SMEs all over the world have played a fundamental role in promoting economic
and industrial production. MSMEs especially the ―micro-enterprises” provide the
necessary foundations for sustained growth and rising incomes in the less developed and
transitional economies. SMEs together make up over 90% of the businesses in the world
and account for 50 – 60% of worldwide employment. According to IFC MSME Country
Indicators 2013 formal MSMEs generate 35% of employment in upper middle-income
countries, 42% in lower middle-income and 34% in low-income countries (Scott et al.
2014). In developing countries, encouragement of an expanded private sector and the
creation of local business opportunities is a crucial aspect of economic and industrial
growth and the key to successful poverty alleviation activities. However, in the current
state of changing times, MSMEs need to adapt themselves to new realities and challenges
and to stay competitive. Not only they must add new features to their products, improve
performance and reduce prices to remain competitive, but must also innovate to create
new products and markets (ESCAP 2011).
Access to energy is widely considered to be vital to the operations of most Micro,
Small and Medium Enterprises (usually called MSMEs/SMEs).
1 There is no universal definition of MSMEs. Most Common definition of micro, small and medium
enterprises as follows: micro (1-10 employees), small (10-49 employees), and medium (50-250 employees). But the capital among them defer from country to country.
-
2
―Energy inputs such as electricity and fuels are essential to generate
jobs, industrial activities, transportation, commerce, micro-
enterprises and agriculture outputs‖ and resolving the energy
challenge is recognized as critical for achieving the UN Millennium
Development Goals (UN-Energy 2005).
It is well established that there is a close relation between expanding rural energy
access and socio-economic development (Srivastava & Rehman 2006; Kanagawa and
Nakata 2008). An unreliable electricity supply – electricity insecurity – can affect several
aspects of business operations. Inadequate electricity services can constrain business
operations because a supply of electricity may simply be unavailable and, if it is
available, securing a connection may be difficult and the supply unreliable, even before
its cost is considered. High quality and accessible infrastructure encourages productivity,
business growth and investment, but when it is poor and unreliable, businesses‘
productivity and growth suffer. Electricity access and insecurity, as well as cost, are
perceived to be significant problems in developing countries, considerably more so than
in high income countries. There are several observations that it is a prerequisite for doing
business, alongside capital and skills and market access (Scott et al. 2014). So the
MSMEs need reliable supply of electricity at a reasonable cost and affordable price. But
due to low population density and insufficient number of potential customers, lack of
government funds and private investment, it is quite difficult to provide electricity in the
un-electrified rural area. Therefore, reliable electrification at low cost through the
extension of the central electricity grid will most likely is not feasible to achieve future
energy security, so that Renewable Energy Technology (RET) is the most economical
option for providing energy to the rural areas (REN21 2008). The role of RETs is crucial
to providing reliable, affordable and appropriate energy solution to MSMEs. For
developing countries, providing and maintaining energy access is an important driver for
off-grid renewable energy systems (IRENA 2013). Answer to the question what is RET,
it is defined by senewable Energy Association (2009) as ―‗senewable Energy
Technologies (RETs) are energy-providing technologies that utilize energy sources in
ways that do not deplete the Earth‘s natural resources and are as environmentally benign
as possible. These sources are sustainable in that they can be managed to ensure they can
be used indefinitely without degrading the environment” (cited in sena 2012). The lack
of access to energy services as mentioned has a negative impact on development
-
3
especially for business development, as the rural enterprises have limited access to
modern energy services. Given the continuously rising energy and commodity demand,
prices and security, it is expected that the use of RET to meet the energy security will be
more convenient in the future particularly to meet the rural enterprises energy demand as
in most of the cases electricity is used for consumptive power by the MSMEs in the rural
areas.
Renewable energy technology or RETs need to be effectively tapped by MSMEs,
so that they can enhance their competitiveness. The deployment of RETs need to be seen
as a process which compliments and is customized to the local requirements of the users
such as micro and SMEs, with a view to enhance their competitiveness aspect especially
those related to quality, convenience, flexibility, delivery and cost of the product. The
technology innovation in the context of MSMEs has to be deployed in a way that enables
its business activity to operate efficiently and profitably, while providing equitable
opportunities for jobs, and due consideration to gender issues such as inclusive role of
women. The technology transfers of RETs to Micro-Enterprises (MEs) will modernized
their production system and make them more efficient, make them more profitable and
economically competitive (ESCAP 2011).
1.2 Background and Context
Accelerating growth and reducing poverty, income inequality and regional
disparity are the overarching goals of the current development paradigm in Bangladesh.
The main strategy for achieving these goals include creation of productive employment in
the manufacturing and organized service sector and withdrawal of labor force out of the
low skilled and low return agricultural sector and informal activities (Bakht & Basher
2015). Because of 131.5 million people of Bangladesh live in rural areas, where almost
one third of the total population lives below the poverty line and a significant proportion
of them live in extreme poverty, micro-entrepreneurship has been a popular poverty
alleviation strategy in Bangladesh for many years (Tushar & Akter 2013).
Since small and micro enterprises make up more than 90 per cent of the number of
enterprises and employ about three-fourth of its labor force, including manufacturing,
trade and service sectors, this sector can play the pivotal role in achieving targets set in
Vision 2021 of Bangladesh (BBS 2013). The Sixth Five Year Plan (SFYP) of Bangladesh
lays out the roadmap of small and medium enterprise (SME) sector to achieve higher
-
4
equitable growth to fulfill the vision of elevating the country to the middle-income group
by the end of 2021. Development of MSME is envisaged as a key element in this
development strategy. For achieving double digit growth, matching development of
MSMEs is considered critical. Enhanced MSME activities in the rural and backward
regions constitute a key component of the strategy for rural development and reduction of
poverty and regional disparity (GoB 2011). In Bangladesh, the nature and growth of
MSMEs over the last two decades indicate a horizontal expansion of enterprises in terms
of increasing the number of establishments without major change in the pyramid-like
structure. In 1986, total number of enterprises was 2.6 million of which 2.5 million were
MEs (98 per cent); whereas SMEs were 49,000 (1.9 per cent) and large enterprises were
2300 (0.08 per cent). In 2002, the structure and composition of enterprises were remained
almost the same - out of 3.5 million enterprises, 97 per cent were micro, 2.2 per cent were
SMEs and 0.16 were large enterprises (Moazzem 2011).
The major sources of rural income are agricultural production and wage,
retail/whole trade, rural transport, microenterprises of various types, and remittances
(domestic and international). In Bangladesh a country wide survey [by ICG/MIDAS in
2003] of micro, small and medium enterprises (MSMEs), including those with up to 100
workers, shows there are a total of approx six million such enterprises and about three-
quarters of all MSMEs contribute half or more of the household income in both urban and
rural areas and over three-quarters of all MSMEs are located in rural areas (Alamgir
2010).
Bangladesh Bureau of Statistics (BBS) carried out the third Economic Census of
the country during March – May 2013. Like the previous two censuses in 1986 and in
2001 & 2003, the Economic Census 2013 attempted a 100% count of all economic units
in the country outside household based agriculture. The full set of data collected through
the Census is yet to be processed and published. Preliminary results from the Economic
Census 2013 are presented in Table 1.1. Based on the Preliminary result of the Economic
Census 2013, it can be affirmed that the nonfarm economic units are dominated. Thus,
nearly 97% of all nonfarm economic units in 2013 had less than 10 workers, compared to
manufacturing, trade and service activities have a higher incidence of units with less than
10 workers (BBS 2013). Similarly, rural units as opposed to urban units have higher
incidence of units with less than 10 workers (Bakht & Basher 2015).
-
5
Table 1.1: Number of Nonfarm Economic Units in the Three Economic Censuses
Description 1986 2001/03 2013
Total number of economic units (000) 2169 3708 7950
Inter-census yearly compound growth in total number
of economic units (%) - 3.4 7.2
Number of trade and other service units (000) 1638 3218 7081
Share of trade and other service units in total number
of units (%) 75.5 86.8 89.1
Inter-census yearly compound growth in the number
of trade and other service units (%) - 4.0 7.4
Number of rural units (000) 1379 2369 5742
Share of rural in total number of units (%) 63.6 63.9 72.2
Inter-census yearly compound growth in the number
of rural units (%) - 3.4 8.4
Number of urban units (000) 790 1339 2208
Share of urban units in total number of units (%) 36.4 36.1 27.8
(Source: Bakht & Basher 2015).
Deficient physical infrastructure and utility services constitutes one of the major
impediments to MSME development in Bangladesh. It is widely acknowledged that
greater investment and/or better performance from existing infrastructure facilities and
utility services would have high returns in terms of reduced costs of doing business. In an
earlier perception survey of sample entrepreneurs by ICG/MIDAS in 2003, it was found
that the respondents considered electricity to be the most serious structural bottleneck
encountered by them and lack of access to gas and electricity constitute the binding
constraint to decentralized growth of private investment, particularly of MSMEs (Bakht
& Basher 2015). The key challenges in rural non-farm activities include lack of access to
credit, market and electricity and lack of education and training of entrepreneurs (NSDS,
2013). The quality of Bangladesh‘s electricity supply ranks 124th out of 144 countries in
the World Economic Forum‘s Global Competitiveness Report 2014-2015 (Sala-I-Martín
et al. 2015), and 125th out of 129 countries for energy security in the World Energy
Council‘s Energy Sustainability Index (Oliver 2014).
In developing countries like Bangladesh solar power offers an effective solution to
the problem of energy access. To meet the power demand, both the developed and
-
6
developing countries take grid extension as the mean but the rapid reduction of the cost of
photovoltaic solar power generation and increasing technology development, solar
photovoltaic power generating system (e.g. Solar Home System (SHS), Solar thermal
etc.) is now becoming popular all over the world especially in the developing countries
like Bangladesh. There is tremendous potential for renewable energy technologies to
provide energy services in off-grid areas of Bangladesh (Eusuf (ed.) 2005; A.K.M. Islam
et al. 2005; M.R. Islam et al. 2006; M.A.H. Mondal et al. 2010). Sadeque et al. (2014)
have thoroughly documented the Solar Photovoltaic (PV) program in Bangladesh,
considered to be the largest off-grid program in the world, and have highlighted that the
program has achieved success due to leveraging of an extensive micro-finance institution
network, high population density thereby ensuring economics of scale, a competent and
passionate local champion (Infrastructure Development Company of Bangladesh) as the
nodal implementing agency, affordable financing and strong emphasis on quality of the
systems.
Bangladesh Government has a vision to electrify entire country by the end of year
2020. SHS is an alternative to grid connection for supply of energy in rural and isolated
areas. Solar PV based electricity generation systems provide a good prospect to supply
electricity for rural areas in Bangladesh. Solar PV systems can contribute to poverty
alleviation and socio-economic development of remote rural areas (Chakrabarty & Islam
2011). The last 14 years of data shows that both rural and urban people prefer SHS as an
effective alternative in providing energy for homes and businesses (Khan et al. 2012).
The main use of SHS is to provide access to electricity for people in remote and rural
areas, who are not usually connected to the national grid, replacing kerosene lighting and
battery-supported electricity supply.
In Bangladesh, photovoltaic (PV) technology in the form of solar home systems
(SHS) has been widely applied for rural electrification purposes (Sharif & Mithila 2013).
In addition to lighting, SHS supply power for small electrical appliances such as radios,
cassette players, mobile chargers and TVs. In Bangladesh, as SHS becomes a popular
electrification tool in rural areas, several indicators have been used as evaluation tools for
off-grid households and enterprises electrification with SHS, such as number of SHS
installed, percentage of installed SHS currently operating, technological transfer to the
enterprises involved, and the creation of markets for SHS and their accessories.
-
7
Moreover, user satisfaction is widely applied as an evaluation tool for those who have
received electricity from SHS (Komatsu et al. 2013).
Barua (2001) claimed that Renewable Energy (RE), for example, SHS in
Bangladesh, can benefit living, help to preserve fossil fuels and to alleviate poverty by
providing income generation opportunities while women welfare, children's education
and so on may also be improved. As a result, many NGOs and private organizations have
emerged as a pioneer for providing SHS in rural Bangladesh with technical assistance
from Infrastructure Development Company Limited (IDCOL). Every month on an
average 30,000 SHSs are being installed in rural Bangladesh, enhancing the energy access
at the rate of 3.5% (World Bank, 2011). With 52 partner organizations (POs), IDCOL has
provided electricity to 200,000 people per month by installing 50,000 SHSs every month,
adding 2.0 MW to national electricity generation (IDCOL 2015a). Up to September,
2015, IDCOL has installed a total of 3,840,593 SHSs all over Bangladesh. SHSs are
becoming the most popular technology among the available renewable technologies
practice in Bangladesh especially in rural and coastal areas. Most of the rural and coastal
people in the country have no electricity access. Consequently, SHSs may be an effective
option for off grid electrification of those areas (Halder et al. 2013).
1.3 Statement of the Problem
The dynamic role of micro and small-scale enterprises (MSEs) in developing
countries as ―necessary engines for achieving national development goals such as
economic growth, poverty alleviation, employment and wealth creation, leading to a more
equitable distribution of income and increased productivity is widely recognized‘
(William & Webster 1992). When treating end-users in the rural areas of developing
countries with respect for their capacity to make their own investment choices and to
define themselves what is best for them, the question is inherently answered.
The World Bank Enterprise Surveys show that firms in middle and lower income
countries consider electricity access one of the biggest constraints to their business , with
constraints stemming from inadequacies in aspects of electricity service (access to
electricity, availability of electricity, and reliability of supply), as well as cost. Electricity
insecurity has impacts on numerous aspects of business operations (Scott et al. 2014).
-
8
Moreover, there is a very little understanding of the linkages between uses and
impact of electricity services and micro enterprises establishment, survival, expansion,
growth, decline and closure in rural areas in developing countries in general. In addition,
there are very few studies, which concretely assessed the actual impact of grid electricity
services upon Micro-Enterprise (ME) development in the rural areas of the developing
world.
It is argued that the key driver to the interest in disseminating PV technology in
the developing world especially in Bangladesh is a preoccupation with electricity. For
instance, a number of multilateral agencies, Government of Bangladesh (GoB) and non
government organizations (NGOs) have actively supported various initiatives to promote
the dissemination of PV technologies in rural communities of Bangladesh. The
implementation measures for these initiatives and the question of whether they are having
the desired effects on the rural populations in the developing world (especially solar PV)
are issues worthy of detailed critical scrutiny. Electrification program are often justified
by the socio-economic befit resulting from productive use of energy such as increase in
income and creation of new employment (Attigah 2015).
Not all enterprises are able to use SHS for increasing productivity. So lacking
reliable data and information about significant positive role of SHS on MEs may limit the
room for entrepreneurs to choose this type of modern energy for productive activities.
Furthermore, this lack of data and information on the linkages between SHS and MEs
development may have effects on national policy strategies to combat poverty as most of
poor people in the rural areas depend on MEs for their income generation beside
agriculture.
Most of the previous study in this field is based on qualitative data. A mix of
qualitative and quantitative method is highly needed to find the causal relation between
the development of MEs and use of SHS. In Bangladesh, further research is needed in
order to get insight of the changes brought within MEs and between different MEs by up
taking SHS; who is affected by these changes and why that category of people; to identify
barriers and constraints ME‘s are facing in accessing and using electricity services.
-
9
1.4 Research Objective
This research would examine whether the rural entrepreneurs in Bangladesh are
observing any changes due to introduction of SHS in their enterprises and it will also try
to find out whether SHS is enhancing their ability to bring about changes in their
enterprise.
In line with the above stated circumstances this research has set the specific
objectives to study the role of SHS uses for ME development in rural off grid areas in
Bangladesh, and to study the changes brought to rural ME by up taking SHS, if any.
1.5 Research Questions
To address the research objectives, the study will attempt to find the answers of
the following research questions.
1. What are the services that the MEs in Bangladesh are getting from SHS?
2. To what extent these services are helping to bring about changes in their business?
1.6 Scope and Limitations of the Study
This study has examined the role of SHS on trade and service related rural MEs in
off grid area of Durgapur, Netrokona of Bangladesh only. Other renewable energy
technologies (RET) and other types of micro-enterprises in the study area are kept out of
the scope of this study.
All the aspects of change in MEs of a particular area under any single
technological intervention as such, quite impossible to determine and measure in a short
period of time. The change usually has taken place for a long period of time under the
influence of many interventions.
The reviewed literature was in line with the scope of the research. At the time of
drawing of analytical framework, and when the data is presented and analyzed the scope
and limitation is always kept in mind.
1.7 Significance and Rationale of the study
Rural electrification is a very important process to provide access to modern
energy, especially to the poor people in developing countries like Bangladesh. Rural
-
10
electrification programs in Bangladesh focus on providing development assistance
through the supply of electricity services to stimulate economic productivity and enhance
the quality of life in rural areas. Energy for rural development in developing countries has
been an issue of national interest for some time, receiving significant attention in most
developing countries during the last three decades of the twentieth century. Three main
options have been considered to steer the electrification drive for rural areas
(Bawakyillenuo 2007). The first is centralized electrification, consisting of an extension
of the domestic electricity network; another is the decentralized local grid powered for
instance, by diesel or small hydro plants. The third is electrification without grids, which
includes stand alone systems such as photovoltaic (PV) Solar Home Systems (SHSs).
In recent times, however, considerable advocacy has taken place in the academic
and policy studies, and national agenda about solar PV energy technology serving as a
panacea to the energy problems and rural electrification of rural populations of remote
and isolated rural areas of Bangladesh. Notwithstanding this great advocacy, the literature
on the dissemination of the SHS for rural ME is not well discussed and documented.
Most of the rural electrification with the help of SHS at present is confined to
measure only quantifiable variables, such as the number of consumer electrified.
Moreover impact of electrification on rural MSMEs especially on the ME operation also
seldom evaluated, though there are many study regarding introduction of SHS in the
household of Bangladesh. This study will mitigate that gap.
This study adopts mixed method to gauge the role of SHS uses in micro
enterprise. The result of the study is expected to enhance policy and planning efforts of
government and NGOs to use the SHS as a strong instrument for micro enterprise
development.
The outcome of this research would lead to better understanding on the role of
RET for rural empowerment, for income generating opportunities, and finally contribute
to poverty reduction. This is possible because the linkages between electricity services
from SHS and ME development in rural areas would has clearly stated and those could be
used to understand the influence of SHS for ME development in the rural areas.
-
11
1.8 Operational Definition of the Two Core Concept
SMEs/MSMEs: There is no uniform definition of SMEs/MSMEs. This research
has used the following definition which is given in Table 1.2.
Table 1.2: Definition of SMEs/MSMEs
Sector Total Fixed Assets excluding land
and building (Tk million)
Labor Employment
Medium industry/ enterprise
Manufacturing 100.0 - 300.0 100 - 250
Service/ Trading 10.0 - 150.0 50 - 100
Small enterprise
Manufacturing 5.0 - 100.0 25 - 99
Service/ Trading 0.5 - 10.0 10 - 25
Micro enterprise
Manufacturing 0.5 - 5.0 10 - 24
Service/ Trading ≤ 0.5 ≤ 10
Source: (BB 2013)
Solar Home System: A SHS incorporates a photovoltaic solar panel, a
rechargeable battery, a charge controller and in most cases electric lights and possibly
other electronic devices. Solar panel converts sunlight into electricity through
photovoltaic process and stored rechargeable battery. Finally, the electricity is supplied to
the DC (Direct Current) load or AC (Alternating Current) load by converting as
consumer‘s requirement (Lysen 2012). Figure 1.1 shows the picture of a typical solar
home system. Owning an SHS enables users to produce their own electricity, and
accessing requested services like electric lighting, mobile charging and other usage like to
run Television (TV), fan etc.
-
12
Figure 1.1: Solar Home System
(Source: Khandker et al. 2014)
The power of the panel can range from 10 Wp to 130 Wp, where Wp [watt-peak]
denotes the power generated under conditions equivalent to bright sun in the tropics. The
use of these applications is considered to be an important solution to rural electrification
and rural development (Khandker et al. 2014).
1.9 Outline of the Chapters
This thesis is composed of seven chapters which are presented below:
Chapter One: Introductory Discussion- It gives an overview of the discussion
that deals with background, research problem, significance of the study, research
questions, research objectives, scope and limitation of the study and structure of the
thesis.
Chapter Two: Current State of Renewable Energy Development in
Bangladesh- Overview of the current RE development in Bangladesh is discussed in this
chapter. In addition, this chapter describes the current state of power generation in
Bangladesh, Renewable Energy Policy 2008 of Bangladesh and the role of IDCOL for RE
development in Bangladesh with latest data in contrast to solar technology (namely SHS
and solar irrigation).
Chapter Three: Literature Review, Theoretical concept and Analytical
Framework- In this chapter some relevant and available literatures has reviewed,
-
13
applicable theory has discussed, and identifies related variables from literature review and
theory. This chapter explains the experience of SHS usage in MEs and provides logical
arguments for identifying those variables, and finally draws an analytical framework for
this study on the basis of the grounded reality of the issue.
Chapter Four: Methodology- It makes an attempt to employ various
methodological approaches used in this study. It also discusses reasons for use of various
methodological approaches, how such approaches were justified over others, and how
these were incorporated in this study.
Chapter Five: Data Presentation, Analysis and Discussion - Data collected
from the field through questionnaire survey, observation and in-depth interviews are
briefly presented in first sections of this chapter. This chapter highlights the major
findings of the study. It also establishes a link between primary data and information
drawn from all sources to address the research questions to meet the research objectives
in the study. In this connection it also discusses applicability of analytical framework
compare with the previous relevant literature in explaining the research questions and
objectives of the study and to what extent can findings are generalized.
Chapter Six: Conclusion- This chapter draws major findings of the research and
makes concluding remarks of the study, policy consideration, recommendations and how
this study can be implicated for further research.
-
14
Chapter 2
Current State of Renewable Energy Development in Bangladesh
2.1 Introduction
Energy is considered as one of the basic ingredients for alleviating poverty and
expediting socioeconomic development. One of the main goals of the Government of
Bangladesh (GoB) is to bring the entire country under electricity service by the year
2020, which is stated in VISION 2021. It is also a constitutional mandate as stated in the
Article 16 in ―The Constitution of the People's sepublic of Bangladesh”:
―The State shall adopt effective measures to bring about a radical
transformation in the rural areas through the promotion of an
agricultural revolution, the provision of rural electrification, the
development of cottage and other industries, and the improvement
of education, communications and public health, in those areas, so
as progressively to remove the disparity in the standards of living
between the urban and the rural areas”.
At present the national grid is serving 72 percent of Bangladesh total population
and it is interrupted by power cut (7FYP 2015). The situation gets worse in the time of
irrigation season. In comparison, only 62 percent of Bangladesh‘s population had access
to electricity in 2013, with a wide disparity between urban areas (90 percent) and rural
areas (43 percent), and about 13 million rural households without electricity (NSDSP
2013). Even those with access to electricity routinely experience supply disruptions. The
dispersed nature of rural settlements, especially in the delta and hilly regions make the
extension of the electricity grid to these areas difficult and expensive. Moreover, the
existing sources of power are non-renewable. Bangladesh's energy infrastructure is quite
small, insufficient and poorly managed (Uddin et al. 2014). The energy prospect is
generally assessed on the basis of available commercial sources of energy i.e., fossil fuel-
like gas, coal, oil etc.
2.2 Current State of Power Generation of Bangladesh
Electricity is a typical form of energy and considered as the most critical input for
the technological, industrial, and economic development. Almost 41.1million people live
-
15
below the poverty line in the country. In a typical developing economy a one percent
increase in GDP leads to 1.5 percent increase in electricity demand (NSDP 2013). This
implies an average 6 percent growth would require more than 9 percent growth in
electricity supply. In Figure 2.1 the GDP growth rate and electricity generation growth of
Bangladesh is presented. From Figure 2.1, it can be shown that the growth rate of
electricity generation has increased to 13.2% in the fiscal year 2012-2013, which was
5.5% in the fiscal year 2006–2007. On the other hand, the GDP growth rate was 6.15% in
the fiscal year 2006–2007 which has increased to 6.8% in the fiscal year 2012–2013
(Halder et al. 2015).
Figure 2.1: GDP growth rate and electricity generation growth of Bangladesh
Source: Halder et al. 2015
In Bangladesh, the electricity generation is highly dependent on fossil fuel
especially on natural gas. Up to October 2015, total installed capacity is about 11,877MW
including 6,365MW (54%) from public sector and 5,512MW (46%) from private sector,
where only natural gas accounts for 62.59% raw material for the power production
(BPDB 2015a). About 89% of power previously comes from natural gas and the rest is
from liquid fuel, coal and hydropower (Power Division 2015a). Table 2.1 presents
Current power generation mix with installed electricity capacity in Bangladesh.
-
16
Table 2.1: Installed Capacity of BPDB Power Plants as on November 2015
Fuel Type Capacity(Unit) Total (%)
Coal 250.00 MW 2.1 %
Gas 7434.00 MW 62.59 %
HFO (Heavy Fuel Oil) 2507.00 MW 21.11 %
HSD (Hybrid Synergy Drive) 956.00 MW 8.05 %
Hydro 230.00 MW 1.94 %
Imported 500.00 MW 4.21 %
Total 11877.00 MW 100 %
(Source: BPDB 2015a)
The demand of electricity increased proportionally with economic growth, rapid
urbanization, and industrial development of the country. The population‘s access to
electricity increased from the FY2010 baseline of 48% to 74% in FY2015. The other
target indicator, per capita electricity generation, also increased from 220 kWh to 371
kWh (7FYP 2015), which is very low compared to other developing countries. GoB has
taken rigorous initiatives implementing various policies and programs towards achieving
target of per capita electricity consumption 600 kWh by 2020 (Halder et al. 2015).
As the reserve of natural gas is not unlimited and depleting gradually, the actual
scenario of power generation has changed. To tackle the uncertainty and reduction of
carbon emission, to uphold climate change and sustainable development government has
prepared ―Power System Master Plan 2010” to build up energy balanced sustainable
power system in the country. The GoB has planned to diversify the power generation fuel
mix. Renewable energy development is one of the important strategies of the fuel
diversification program (Power Division 2015a). According to the plan 15% of total
electricity generation will come from renewable and new energy sources by 2020.
Renewable energy is a challenge, but also an opportunity for new industries, employment,
and new ways to reduce dependency on fuel imports, provide electricity to poor remote
areas, reduce air pollution, and provide a healthier environment.
The GoB has taken a number of actions on priority basis to promote production
and use of renewable energy in different areas of the country. There has been some
progress in expanding use of solar power for domestic purposes especially in off-grid
areas. Irrigation pump driven by solar power, solar mini-grids in the distant islands, solar
panel assembly plants and telecommunication towers driven by solar power have been
installed.
-
17
2.3 Renewable Energy Expansion Initiative
Due to the high initial cost commercial use of renewable energy in sustainable
manner is still a great challenge for Bangladesh like other part of the world. For a
sustainable development of the renewable energy sector GoB has adopted a systematic
approach. The initiative includes development of awareness, legal and regulatory
framework, institutional development and financing mechanism to drive the sector.
2.3.1 Renewable Energy Policy
Renewable Energy Policy has been approved in 2008. Through this policy the
government is committed to facilitate both public and private sector investment in
renewable energy projects to substitute indigenous non- renewable energy supplies and
scale up contributions of existing renewable energy based electricity productions. The
Policy envisions 5% of total generation from renewable sources by 2015 and 10% of the
same by 2020. The core objectives of the REP-2008 are
Harness Renewable Energy Potential & Dissemination throughout the country
Enable, Encourage & Facilitate Public & Private Sector Renewable Energy
development
Scale up Renewable Energy for Electricity & Heat Energy
Promote Appropriate, Efficient & Environment Friendly use of Renewable Energy
Develop Capacity at every level of Renewable Energy development.
By analyzing the REP-2008 it is found that the target for renewable energy
development is specifically set in the policy which is 5% of total generation from
renewable sources by 2015 and 10% of the same by 2020. The policy did not give any
specific direction or discussion about the Feed-in tariff / premium payment, electric utility
quota, net metering, bio-fuels obligation/ mandate, heat obligation/ mandate which
needed government regulatory action. But the GoB has expressed his support for fiscal
incentive in favor of the renewable energy development investors. According to the
policy the incentives are given to the privet investors are given below:
All renewable energy equipments and related raw materials in producing
renewable energy equipments is exempted from charging 15% VAT.
-
18
Renewable energy project investor both in public and private sectors is exempted
from corporate income tax for a period of 5 year.
An incentive tariff is considered for electricity generated from renewable energy
sources which is higher than the highest purchase price of electricity by the utility
from private generators.
REP-2008 is a guideline how and to what extent RE energy contributes in the total
fuel mix. But there was no guideline how fiscal incentives will be provided for renewable
energy development. In ever-changing world nothing remain constant, situation and
context also change. As time passes limitation come out into daylight. By considering the
limitation, the GoB is upgrading the REP-208, though it is yet to publish. It‘s hoped that
the limitation of the current REP-2008 will be overcome by the new renewable energy
policy.
2.3.2 Current Contribution and Future Plan of Renewable Energy Development in
the Power Sector
Bangladesh is a densely populated country. The electricity coverage and
production capacity to meet the demand is also not in a global standard. The power
generation is also mono fuel dependent. The share of natural gas for power production is
currently 63 percent. To reduce dependency over the mono fuel, the share of renewable
energy in the power generation need to increase. The current share renewable energy is
403.6MW which is 3.6 percent of the total power generation (SREDA 2015). If the
energy produced by Kaptai Hydro-electric power plant is deducted, the rest of the power
is coming from the Solar PV system of which are most of are from off-grid. The share of
grid connected renewable energy is very small.
To achieve the renewable energy generation target which stated in the REP-2008,
the priority should be given to the solar power generation conceding the landscape and
weather. For this the government already has taken ―500MW Solar Power Programme”
which started in 2012 and will end at 2016. From the ―500MW Solar Programme” it is
found that the projects are categorized in two types: Commercial Projects and Social
Sector Projects according to the project financing, implementation approach and modus
operandi (Power Division 2013). Privet sector will implement, operate and maintain
commercial projects. While the government will be implement the social project by the
-
19
different ministries and agencies as a part of social responsibilities. Table 2.2 presents the
share of commercial and social projects which is given below.
Table 2.2: Project under “500MW Solar Power Programme”
Type of Projects Capacity (MW)
Commercial projects
Solar Irrigation 150
Solar Mini Grid 25
Solar Park 135
Solar Rooftop
Residential and Commercial Building 10
Industrial Building 20
Social projects
Solar electrification in Health Centers 50
Solar electrification in Remote Educational Institutions 40
Solar electrification at Union e-Centers 07
Solar electrification in Religious Establishment 12
Solar electrification at Remote Railway Stations 10
Solar PV System in Government and Semi- Government Offices
41
Total 500
(Source: Power Division 2013)
It has been found that the ―500MW Solar Power Programme” of the GoB is in
initial stage and yet to implement. The GoB has already approved and implementing
handful number of solar power development program. Some privet investments on solar
and wind power generation proposals are also approved by the GoB and some are placed
for approval. GoB have set target for the organization under the control of Power
Division to achieve the REP-2008 target about renewable energy development, those
targets are presented in Table 2.3.
Table 2.3: Target for RE development of different government organization
Name of the Organization Solar Power (MW) Wind Power (MW)
BPDB 100 100
APCL 100 100
EGCB 100 100
NWPGCL 55 100
CPGL 50 100
(Source: Power Division 2015b )
The GoB has already launched a number of projects for renewable energy
development. The projects are mainly grid tied solar technology based, the other form of
-
20
technology like wind and biomass are small in number and capacity. Off grid technology
are mainly handled by IDCOL through IDCOL SHS program. About 1000MW power
generation plan from RE is on the pipeline. The summery of the approved renewable
energy development proeect by GoB is listed in Table 2.4. Full description of the projects
is presented in Appendix I.
Table 2.4: Approved Renewable Energy Projects
Technology Description Financing
Organization
Solar Park (Grid Tied) Total Capacity of 824.6MW ADB, IPP, GoB
Solar Park (Mini Grid) Two project of 650kW and 36kW BCCTF, ADB
Solar Irrigation 500 Pump on pilot basis GoB, ADB
Solar Home System 2 million SHS IDCOL
Solar Roof-Top 2 project (In Dhaka) GoB
Solar Street Lighting 8400 Set in 8 City Corporation ADB
Wind One project of 60MW IPP
Municipality Waste Power 5-7MW GoB
Hybrid Power (Solar-wind) Hybrid Power Project of 18MW IPP
Wind Power (Wind Resource Mapping)
Technical Assistant Project for Wind Resource Mapping
USAID ,NREL
(Source: Power Division 2015b)
The data presented in the Table 2.2, Table 2.3 and Table 2.4 is not fully
operationalized. The GoB has taken a lot of action to increase the share of RE in the
power generation mix. But still the GoB is lag behind from the target. The RE
development program started from 1996 by Grameen Shakti a sister concern of Grameen
Bank. IDCOL started its SHS program from 2003. With the collaboration of the public
and privet sector the RE development is going on. The growth of renewable energy in
Bangladesh over the year is presented in the figure 2.2.
-
21
Figure 2.2: Year wise total Production of renewable energy
(Source: IRENA 2015)
From the Figure 2.2 it is evident that the development of renewable energy in
Bangladesh is not that much notable if the capacity of Kaptai Hydro power plant is left
out from the calculation. The share of other renewable energy except hydro is increasing
but not in such pace which will lead to achieve the REP-2008 target. The share of solar,
wind and biogas was 165MW which has reached to 173.4MW in 2015 by increasing only
8.4MW. The share of deferent type of renewable energy is given in the Table 2.5.
Table 2.5: Current contribution of renewable energy
Technology Off-Grid (MW) On-Grid (MW) Total (MW)
Solar PV 165 0.5 165.5
Wind 1 0.9 1.9
Hydro - 230 230
Biogas 6 - 6
Grand Total 172 231.5 403.4
(Source: SREDA 2015)
It is seen that 87 percent of solar power generation is from SHS. The share of
different type of solar technology for solar power generation is presented in the Table 2.6.
Table 2.6: The share of different type of solar technology
Technology Capacity (MW) Percentage
Solar Home System (SHS) 143.67 86.81
Solar Irrigation 1.56 0.94
Roof-top Solar System (In Residential Building) 13.42 8.11
Roof-top Solar System (In Office Building) 6.2 3.75
Solar Mini Grid 0.641 0.39
Total 165.6 100
(Source: SREDA 2015)
0
100
200
300
400
2000 2006 2007 2008 2009 2010 2011 2012 2013 2014
230 230 230 230 230 230 230 230 230 230
0 6 10 16 25 41 65 85
142 165
Ca
pa
cit
y i
n M
W
Year
Hydro Except Hydro
-
22
2.4 Function and Role of Infrastructure Development Company Limited's (IDCOL)2
The major share in off-grid rural electrification has been achieved by installing
SHSs (Solar Home Systems). Other types of off-grid electricity include a solar
photovoltaic mini grid, a bio-digester, a small wind generator, and micro-hydro
electricity. Renewable energy technologies other than SHS have not yet been widely
accepted on the market and their contribution to rural electrification has not been
remarkable. The IDCOL has been strongly promoting the dissemination of SHS since
2003. Infrastructure Development Company Limited (IDCOL) was established on May
14, 1997 by the Government of Bangladesh (GoB). The Company was licensed by
Bangladesh Bank as a Non-Bank Financial Institution (NBFI) on January 5, 1998. Since
its inception, IDCOL is playing a major role in bridging the financing gap for developing
medium and large-scale infrastructure and renewable energy projects in Bangladesh.
After a decade, the company now stands as the market leader in private sector energy and
infrastructure financing in Bangladesh. Commercial and developmental benefits are the
main driver for IDCOL to start investing in renewable projects. IDCOL tried to achieve
countrywide goals of rural electrification and meet the energy demand of the country as it
is a government-owned financial institution. When IDCOL has started its SHS program
60% of the country was out of the grid area. Large off-grid market for solar energy and
keenness of the donor to fund the SHS program are the commercial driver. Instead of
giving high subsidy to the extension of the grid which will benefit small number of
people the government decided to direct its subsidies to small-scale infrastructure so that
it could reach the maximum number of people. IDCOL initially received refinancing and
grant support from the World Bank and Global Environment Facility (GEF), respectively.
Later on, GIZ, KfW, ADB, IDB, GPOBA, JICA, USAID and DFID came forward with
additional financial and technical assistance for expansion of its SHS Program.
2.4.1 IDCOL SHS program
IDCOL with the support from 58 Partner Organizations (NGO/MFI and Private
Entities in listed and approved by IDCOL) has been implementing the program since
2003. Till September 2015, over 3.84 million SHSs have been installed all over
Bangladesh, which has ensured access to electricity for 16 million households/businesses.
2 The information used in this section is collected from IDCOL through personal communication and by acquiring different seminar presentation of the IDCOL official at different official presentation.
-
23
Average year to year installation growth of the program up to 2013 was 56%. However,
installation in 2014 has declined by 15%. IDCOL has a target to install 6 million SHS by
2018. Year-wise installation of SHS since inception of the program is presented in Figure
2.3, as well as projection is given in Table 2.7.
Figure 2.3: SHS installation growth over the years of IDCOL
(Source: IDCOL 2015a)
Table 2.7: Year-wise installation of SHS by IDCOL
Installation
Up to Sep’15 Installation
2015
Installation
2016
Installation
2017
Installation
2018
Yearly Installation
150,000 660,000 660,000 689,407
Cumulative Installation
3,840,593 3,990,593 4,650,593 5,310,593 6,000,000
(Source: IDCOL 2015a)
IDCOL has been working as a market-oriented finance and training facilitator and
has implemented and been overseeing the program through 58 Partner Organizations
(POs). The POs are mostly nongovernment organizations (NGOs) and they physically
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
To
tal
Inst
all
ati
on
Installation Year
-
24
bring the materials and services to the clients‘ premises. IDCOL arranges the following
support services: Selection of POs, preparation of technical specification for the
materials, selection of suppliers, capacity building training for the POs, and monitoring
the performance of the POs (Figure 2.4).
Figure 2.4: SHS program Structure of IDCOL
(Source: Kahndker et al. 2014)
IDCOL has developed an innovative, partially subsidized SHS delivery and
financing scheme, which has proven quite effective in reaching its clientele base. To keep
system prices affordable and ensure sustainability beyond the program intervention,
IDCOL provides the POs with capital buy-down grants; through market competition, the
grants are passed on to household buyers in the form of a lower unit price. Buyers also are
offered microcredit financing to make SHS affordable. These incentives work together to
create a robust and regulated rural market chain that ensures quality products that meet
safety standards and repair and maintenance facilities with locally available spare parts
(Kahndker et al. 2014).
2.4.1.1 Delivery and Financing Scheme of IDCOL SHS program
IDCOL receives equity funds from the government, and grants and loans from
multiple donor agencies for off-grid program. The IDCOL provides soft loans (at a 6% to
9% interest rate with a 0.5 year or 1 year grace period and a 5 year to 7 year maturity
period) to the POs and channels grants to reduce the cost of systems as well as to support
the institutional development of the POs. IDCOL also provides highest 80% of the loan
extended by the PO to the customer as refinancing (US$130 per system/household). In
addition, IDCOL provides the POs several direct incentives that encourage them to lower
-
25
the unit price to the extent possible. Two types of grants are provided1: (a) buydown
grants to reduce household-level costs and promote systems in remote areas and (b)
institutional development grants to build capacity of the smaller POs. Initially, grant
amounts were as high as 25% of the SHS cost. Now, it has come down to less that 10% of
SHS cost. IDCOL is now providing Buy-down grant only. From 2013, this grant is only
available for smaller sized SHSs (
-
26
2.4.2 IDCOL Solar Irrigation program
In Bangladesh there are 0.27 million irrigation pump which run by electricity
consuming 1500MW power and 1.34 million irrigation pump run by diesel consuming 1
million tons diesel/yr worth USD 900 million. The government has to provide USD 280
million as subsidy for diesel. Considering this calculation, IDCOL has targeted to set up
1500 solar irrigation pump by 2018. Implementation status of the current solar irrigation
project is presented in Table 2.9.
Table 2.9: Solar irrigation program of IDCOL
Approved
Installed from
approved
Under
Installation
In
Pipeline Total
Number of pumps 445 no. 168 no. 277 no. 92 no. 537 no.
(Source: IDCOL 2015b)
For setting up solar pump POs put in 15% of the project cost as equity and
supply water to the farmers as needed, and at an agreed price, during irrigation
season. POs order pumps once IDCOL approves technical specifications and install
them. After installation, POs can apply for credit and grant financing from
IDCOL. IDCOL provides up to 50% of the project cost as grant financing and 35% as
credit support – the remaining 15% is covered by PO equity.
2.4.3 Concluding Remark of IDCOL Role
The Solar Home System program and the solar irrigation program of IDCOL is a
collaborative effort where strengths of each stakeholder have been harnessed to the fullest
extent. Donor agencies through their global experience, IDCOL through discharging
social responsibility of the government, POs through their access to grass root levels,
private suppliers through their dynamism and academicians through their professionalism
have contributed in designing a model which has been very well accepted by the target
group. Though the SHS program is successful, the solar irrigation program is yet to
flourish. On global context it is a commendable success for Bangladesh.
-
27
2.5 Conclusion
RET is the technology of the Future. But unless this technology can reach the
most deprived and vulnerable group in the world today, the millions of rural people who
suffer most from the energy crisis, this technology will neither reach its full potential, nor
will the economic and social problems of the world be solved (Islam 2012). The
development of renewable energy of Bangladesh in a large scale is still in initial stage.
The diffusion of RET in the off-grid area is a success but the grid tied RET is yet to
boom. SHS has been a successful story in Bangladesh. The rural people of Bangladesh
have accepted SHS on a mass scale. Once it was thought that solar energy was not
affordable for the rural people. This myth has been broken. The people of the rural area
are using RET for their development in a variety of way. In the next chapter literatures
related to the research topic and relevant theory/theories for drawing an analytical
framework which were studied to meet the research objectives and answer the research
question is presented. Moreover the analytical framework is also drawn in the next
chapter based on the reviewed literature and theory.
-
28
Chapter 3
Literature Review, Theoretical Concept and Analytical Framework
3.1 Introduction
To meet the objectives and answer the research questions, reviewing the existing
literatures related to the research topic and relevant theory/theories; and draw an
analytical framework for the study is essential. This section starts with reviewing some
available and relevant literature. After that a discussion and definition around the concept
functionings and capabilities is made, followed by discussion on the influence of
personal, social, and environmental characteristics on these fucntionings and capabilities.
Even though mainly a specific part of this capability approach theory is used as the
practical analytical framework for this study, the theory is briefly explained here in order
to create a comprehensible context. At the last section of this chapter analytical
framework and variable matrix is drawn based on the reviewed literature and capability
approach.
3.2 Literature Review
To get a better understanding the role SHS in the rural area of the developing
country, literature pertaining to relevant studies in this field has reviewed. This chapter
focused on the past researches that have been done relevant to this research study on
socio-economic impacts of photovoltaic solar system specifically by SHS. This chapter
has helped in gaining a better understanding of the research in terms of contemporary and
empirical literature. The literature review has focused on the use of SHS for ME
development and empirical studies from Bangladesh and beyond.
Many studies regarding impact of electrification of rural enterprises have been
conducted. The electrification was based on two distinct different ways. One is
centralized electrification and other is de-centralized electrification or one is grid
electrification and other off-grid electrification. The popular way of off-grid
electrification in the rural area of the developing world is PV based standalone
electrification which is mostly known as SHS. The researches regarding how the
electricity especially through SHS is working for the development of rural ME are studied
and analyzed by the proposed research for better understanding of the phenomenon. Some
of the selected research analyses are summarized below:
-
29
Barkat et al. (2002) carried out a very rigorous study on the Economic and Social
Impact of a Rural Electrification program on Bangladesh, where they found that access to
rural electrification has a significant impact on the reduction of both income poverty and
all dimensions of human poverty (health, education and women empowerment). They
found that electricity created significant employment opportunities. The most pronounced
among those were creation of scopes for work at night, expansion of local trade and
business activities, generation of employment opportunities for unemployed youth,
broadening of scopes for employment in crop agriculture, establishment of small and
cottage industries, increase in the opportunities for poultry raising, and increase in the
scopes for earning from multiple sources. Business turnover be it daily, weekly or
monthly for electrified retail shops are more than double than that of non-electrified. For
wholesale electrified it is eleven-fold. Similar is true for volume of business, business
hours, volume of customers, employment of electrified shops then nonelectrified.
Generally, the traders of electrified areas appear more vibrant than those of nonelectrified
(Barkat et al. 2002).
Prasad & Dieden (2007) explore how far existing surveys provide data on the
impact of electrification on the uptake of small and medium enterprises or self-
employment among households in South Africa. They indicated that growth in income
generating activities primarily resulted from businesses already connected to electricity.
They used household survey data between 1995 and 2004 to examine the impact of
electrification on the development of micro, small and medium sized enterprises and
those in self employment amongst households. They estimated that between 40% and
53% of the increase in enterprise activity was attributed to the extension of the electricity
grid, indicating that enterprise growth was higher amongst those already connected.
However, in the more remote rural areas the take up did appear to be stronger. It
increased by more than 40% amongst non-connected and only 10% amongst the
connected. Enterprises were mainly in the wholesale and retail sectors. The increase in
cellular telephone technology was also a contributing factor to uptake (Prasad & Dieden
2007).
Kooijman-van Dijk & Clancy (2010) found that there is little empirical evidence
to underpin strategies of poverty reduction through income generation in small scale rural
enterprises by supplying energy. There paper reports on research findings from a three
country study in Bolivia, Tanzania and Vietnam which aimed to provide insights into the
-
30
scope and depth of impacts of modern energy services. Qualitative and quantitative data
were gathered using structure and semi-structured interviews. The nature of the data
collected was shaped by the Livelihoods framework. An analytical framework of four
questions was used to synthesise the findings. In answer to the questions regarding scope
of impacts, at least for electricity, the impacts appear to depend on the location of the
enterprise with regard to diversity of demand for enterprise services. However, the
benefits of improved working conditions for many entrepreneurs and workers and of both
time and access to new and better quality products and services to customers of
enterprises reach a much larger group of people, and these impacts can provide a
substantial impact on poverty, if not on the financial dimension of poverty. For the
entrepreneurs themselves, the changes in incomes to entrepreneurs are generally small,
and reduced profits per enterprise due to market saturation are a common phenomenon.
At the village level, the increase in numbers of enterprises is largely compensated by
closures, growth in terms of employment creation is typically limited to casual
involvement of members of the (extended) family, and the increase in diversity of
enterprises in rural areas is small and slow (Kooijman-van Dijk & Clancy 2010).
Asian Development Bank (2010) conducted impact evaluation study of two rural
electrification projects funded by ADB in Bhutan: the Sustainable Rural Electrification
Project (Loan 1712- BHU); and the Rural Electrification and Network Expansion Project
(Loan 2009-BHU). The study undertaken two tasks: (i) evaluate the performance of the
two loan projects using relevance, effectiveness, efficiency, likely impact, and
sustainability criteria; and (ii) conduct a rigorous quantitative evaluation of the impacts of
the same two projects covering three broad areas influencing quality of life (economic,
social, and environmental) and their sustainability. In the process, the study has
undertaken a comprehensive literature review. The study also identifies key lessons and
issues, and offers recommendations for consideration by ADB management for enhancing
development effectiveness of rural electrification (RE) assistance in Bhutan. The results
of ADB suggest that economic benefits, in terms of percentage increase in income, in
electrified households are higher than in unelectrified households, to a greater extent from
nonfarm activities and, to a lesser extent, from farming. The plausible causes are
establishing or upgrading microenterprises and small businesses, as well as nonfarm
employment. However, data analysis reflecting the impact of RE on microenterprise
activities did not provide any consistent results (ADB 2010).
-
31
Neelsen & Peters (2011) assessed the impact of electricity access in micro-
enterprises in Uganda using quantitative firm-level data from 200 enterprises
complemented by qualitative case studies. The study found out that there was little direct
impact of electricity access on firm profits or worker remuneration. However, there was
significant indirect effect mainly due to increase in demand for goods and services
prompted by migration from non-electrified to electrified communities. The study
concluded by stressing the need for productive energy promotion policies to be put in
place to assist local entrepreneurs to make informed business decisions. By contrast, no
evidence for an expansionary effect of electrification on firm profits or worker
remuneration was found. In fact, many entrepreneurs consider the direct gain from
connecting to the grid to be small. Qualitative information from their study, however,
suggests that a positive indirect impact of electrification on firm performance is induced
by the overall expansive effect electrification has on local demand. The demand increase
can be partly assigned to people moving into the electrified community from surrounding
non-electrified areas. They conclude that if productive energy promotion policies are put
in place they should address drawing up thorough business plans to enable local
entrepreneurs to take informed connection and investment decisions (Neelsen & Peters
2011).
Meadows et al. (2012) conducted a literature review regarding to identify the
Linkages between Modern Energy and Micro-Enterprise. Their literature review covered
the developmental impact of modern energy for micro-enterprise. In terms of linkages
between modern energy and micro-enterprise, the literature reviewed by Meadows et al.
(2012) indicates that:
a) Modern energy can, but does not necessarily, affect the emergence, development,
productivity and efficiency of micro-enterprise.
b) While lack of access to modern energy is often characterized as a barrier to micro-
enterprise development, removing this barrier (through, for example, energy
developments such as electrification) does not necessarily result in microenterprise
development.
According to Meadows et al. (2012) other areas that still require further
investigation include:
-
32
a) The energy needs of specific types of micro-enterprises, and the role of modern
energy in meeting these needs efficiently and effectively;
b) The contribution of micro-enterprise to economic and social development, particularly
with regard to poverty alleviation in developing countries; and
c) The environmental impact of micro-enterprise, including energy-related impacts.
The study of Akpan, Essien & Isihak (2013) examined the impact of rural
electrification through extension of existing grid on rural micro-enterprises in Niger
Delta, Nigeria. The study used purposive sampling and obtained data using structured
questionnaires and personal interviews with the owners of the micro-enterprises. Their
result showed that although not statistically significant, on average, enterprises in
communities connected to the electricity grid are 16.2% more profitable than enterprises
in communities not connected to the grid, and the use of generating sets in providing
back-up electricity makes micro-enterprises more profitable. The study also observed that
micro-enterprise owners are fully aware of the importance of electricity access to the
profitability of their businesses and those who can afford to buy generating sets willingly
do so. Incidentally, the total expenditure on generating sets by some enterprises is up to
three times (3×) the tariff for grid-electricity in rural areas.
An Impact analysis of Electricity Access to Rural SMEs was done by Bose et al.
(2013). The main objective of their research was to identify the impact of electricity
services on rural micro-enterprises. The results were based on a study from a survey
carried out in two electrified villages in Paikgacha, Khulna, Bangladesh. The study
detected favorable changes on the production costs, profit margin, development and
modernization of business, women empowerment, quality of life, and human
development due to the electrification (Bose et al. 2013).
Combining quantitative and qualitative survey instruments such as participatory
rural appraisals (PRA), Kirubi (2006) discovered a positive contribution of electricity
provision to micro-enterprise growth in rural areas. The study explores the relationship
between modern energy and economically productive activities in rural Kenya. The
Research was based on surveys done in Mpeketoni a rural Village of Kenya in Summer
2005, complimented by review of the literature. The findings reveal that access to
electricity, in combination with simultaneous access to markets and other infrastructure
(roads, communication, schools, etc), have contributed to robust growth of
-
33
microenterprises in clear and compelling ways. For instance, productivity per worker and
gross revenues per day increased by the order of over 200% for both carpentry and
tailoring microenterprises (Kirubi 2006). Other studies strongly question the
developmental value of modern energy (e.g., solar PV) that provides ―lighting only” in
rural areas.
Karekezi & Kithyoma (2002) have observed that, while typical solar PV systems
(40-100Wp) are useful for lighting in rural SMEs, they cannot meet the ―heating and
shaft/motive” power needs of the SMEs, which are 100-1000 times higher. PV
technology, they contend, is thus unsuitable and uneconomical for agro-processing
activities that often represent the most attractive options for generating incomes in rural
areas (emphasis added). These energy options could significantly improve the
performance of rural small and micro enterprises.
Brew-Hammond (2010) suggested that productive usage of energy for income
generation must be more and more enforced ‗‗in order to break the vicious circle of low
incomes leading to poor access to modern energy services, which in turn puts severe
limitations on the ability to generate higher incomes‘‘, as increased access to energy may
create new earning opportunities in two ways:
• New business options for micro, small or medium enterprises in the manufacturing,
agriculture and service sectors;
• Additional employment opportunities in the energy supply chain may be created if
universal access is reached.
Chowdhury (2006) conducted a study on sustainable rural energy (SRE) in Solar
Electrification Cluster Village, and Solar Electrification at a Rural Health Clinic in
Boradubi, Sherpur, Bangladesh. The objective of the study was to assess the direct and
indirect impacts of the SRE projects on human poverty reduction and on human security.
More specifically, the objectives of the present study were: (i) to look at the economic
and social impacts of sustainable rural energy on poor people at the local level; (ii) to
look at the governance and management of these infrastructures; and (iii) to identify
lessons learned and suggest policy options in each of the infrastructure projects with a
view to replication micro-macro linkages. The study also collected information by Focus
Group Discussions (FGD) to assess the poverty and gender implications of the SRE. The
study conclude that electrification has a positive impact on scope for work at night,
-
34
expansion of local trade and business, generation of employment opportunities for the
unemplo